I want to lease! Now what?

Now that you’ve decided that leasing is for you, I will tell you exactly how to get the best lease deal. Several factors determine what is best overall, you cannot choose based on lowest monthly payment alone.

Step 1: Select a vehicle
Choosing a vehicle that you know you’ll be able to keep for the duration of the lease is important. Terminating a lease early can be costly, so choose your new car carefully. When considering models, look at the market value or residual value. Later in the publication, I will tell you how the residual value will impact your monthly lease payment. In general, choose a vehicle that will retain its value.

There is a misconception that you should only lease new vehicles. But used cars tend to have a slower rate of depreciation and leasing them can be a smarter choice if you have to terminate your lease early. It would be wise to make sure an extended warranty is purchased to cover you through the term of the lease.

Before making a final decision on a vehicle, consider taking iton an extensive test drive or rent it for a weekend.

Step 2: Negotiate the selling price
What does the selling price have to do with a lease? A lot! Negotiating the purchase price of a vehicle is one of the best ways to dramatically lower your lease payment. The selling price is used in the calculation of a lease payment, as I will explain later. Simply, the lower the purchase price, the lower your payment. This may also be referred to as theCapitalized Cost of a lease, but is only one part of it.

There are many resources on the Internet to assist with negotiating a competitive purchase price. See the section on Internet Resources for some of the best.

When leasing a new car, negotiate the selling price with the dealer before letting them know you are considering leasing it. You will likely get a better deal.

Step 3: Choose the length of your lease
This question is easily answered by looking at how long you’ve kept your last few vehicles. Don’t justify reasons for selecting a longer term just to get a lower payment.The idea is to make the process of getting each new car hassle free and cost effective.Terminating a lease early can be difficult and costly, so choose the term that you know is right for you.

Step 4: Decide how many miles per year you will drive
There are two ways to look at the mileage option. The first is to choose the mileage that is closest to what you have driven over the past several years. This is the safest option.

The second option is to select the lowest mileage option and expect to pay the excess mileage penalty at the end of the lease term. It may seem unreasonable to choose this option, but paying the excess mileage penalty, if there is one, at the end of the lease can save sales tax. Additionally, selecting a lower mileage option provides a naturally higher residual value which results in a lower monthly payment. This will be explained further in the publication.

If you think you drive too many miles each year to lease a car, you are incorrect. You may have to pay more than someone who drives less miles each year, but leasing is still a viable option.

Know what the mileage penalty is and budget for that payment at the end of your lease if you know you will be over the maximum mileage.

Step 5: Decide how much money to put down
The answer is none! Never put money down on a lease. Here’s a true story to explain why.

A customer once leased a Toyota 4Runner and put $3,000 down as a cap reduction. Five months later the vehicle was totaled in an accident. The owner of the car paid his deductible and his insurance company paid its portion of the lease payoff and Gap Insurance paid the remaining balance. The owner did not recover his $3,000 down payment. That money can never be returned.

If you want to lower your payment and have some cash for a down payment, I recommend you put the money into a simple savings account. Use a portion of it each month to help make your lease payment. If something happens to your car, you will be able to walk away from the lease and still have the leftover funds in your savings account.

Finally, any down payment on a lease is taxable.